Total Gas & Power N. Am., Inc. v. Fed. Energy Regulatory Comm'n

Decision Date15 July 2016
Docket NumberCIVIL ACTION NO. 4:16-1250
CourtU.S. District Court — Southern District of Texas

This declaratory judgment action is before the Court on the Motion to Dismiss [Doc. # 27] filed by Defendants Federal Energy Regulatory Commission ("FERC"), its Commissioners, and its Acting Chief Administrative Law Judge (collectively, "Defendants").1 Plaintiffs Total Gas & Power North America, Inc. ("Total"), Aaron Trent Hall ("Hall"), and Therese Nguyen Tran ("Tran") (collectively, "Plaintiffs") have filed a Motion for Summary Judgment [Doc. # 49].2 Essentially, Plaintiffs seek an immediate court ruling that Defendants lack authority to impose a civil penalty for violations of the Natural Gas Act or FERC's rules, regulations, or orders thereunder, and that such penalties must be determined after a jury trial in federal district court. Plaintiffs also ask for declarations on several constitutional claims. Plaintiffs do not seek injunctive relief. Defendants argue that this controversy is not ripe, this Court lacks jurisdiction, and Plaintiffs must litigate the merits before the agency, with a right to judicial review in the court of appeals.

The motions are ripe for determination. After carefully considering the parties' briefing, oral argument, all matters of record, and the applicable legal authorities, the Court grants Defendants' Motion to Dismiss and denies Plaintiffs' Motion for Summary Judgment as moot.


This declaratory judgment action relates to an ongoing FERC administrative process in which Plaintiffs are respondents. The following factual and procedural background is undisputed.3 FERC alleges that Plaintiffs engaged in an illegal scheme to manipulate natural gas markets from 2009 to 2012. Plaintiff Total, aDelaware corporation headquartered in Houston, Texas, is a subsidiary of Total S.A., a French oil and gas company. Plaintiff Total trades and markets Total S.A.'s production assets in the United States. Plaintiffs Hall and Tran were employed by Plaintiff Total in Houston as traders between 2009 and 2012. They are alleged to have engaged "in a cross-market manipulation scheme involving physical trading in one market for the purpose of benefiting related positions in another market" on at least 38 separate occasions.4 The exact details of this scheme are not pertinent to the suit before this Court and no party requests a ruling on the veracity of the allegations against Plaintiffs.

Following an investigation from 2012 to 2015, FERC Commissioners issued an Order to Show Cause alleging that civil monetary penalties should be imposed on Plaintiffs for the civil violations alleged in the pending administrative proceedings.5 While different units within FERC were evaluating the results of the investigation, Plaintiffs filed this declaratory action through which they challenge the legitimacy of the administrative proceeding on various constitutional and statutory grounds. Defendants moved to dismiss this action for lack of jurisdiction. Shortly thereafter, Plaintiffs moved for summary judgment on all claims.6 For the alternative reasons below, the Court concludes Defendants' Motion should be granted and will dismiss this case without prejudice to Plaintiffs' claims.

A. Motion to Dismiss

Defendants move to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. "A case is properly dismissed for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the case."7 When there is a challenge to the court's subject matter jurisdiction, the party asserting jurisdiction bears the burden of establishing that jurisdiction exists.8

B. Declaratory Judgment

Plaintiffs bear the burden of establishing that the Court has jurisdiction to render declaratory judgment on their constitutional and statutory claims. The Declaratory Judgment Act, 28 U.S.C. § 2201, permits a district court "upon the filing of an appropriate pleading, [to] declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." In determining whether to handle a declaratory judgment action, a federal district court must determine (1) whether the declaratory action is justiciable, (2) whether the court has jurisdiction over the case, and (3) whether to exercise its discretion to entertain the action.9

A declaratory judgment action is justiciable where "the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment."10 The declaratory relief requested should "completely resolve" the controversy.11 A "declaratory judgment action, like any other action, must be ripe in order to be justiciable."12 "Whether particular facts are sufficiently immediate to establish an actual controversy is a question that must be addressed on a case-by-case basis."13

The Declaratory Judgment Act does not enlarge the district courts' original jurisdiction; the Act is "procedural only."14 There must be an independent basis of jurisdiction for the Court to render declaratory judgment.15

If the declaratory judgment dispute is justiciable, the Court has discretion whether to exercise its jurisdiction over the action.16 In St. Paul Insurance Co. v. Trejo, the Fifth Circuit articulated seven non-exclusive factors to assess whether toretain and resolve the action or to decline jurisdiction.17 These factors serve three core values: proper allocation of decision-making, fairness of forum selection, and efficiency.18


Plaintiffs request a declaratory judgment that certain aspects of FERC's procedures for the imposition of civil penalties are unauthorized by statute, violate the Appointments Clause of Article II of the United States Constitution,19 violate the Fifth and the Seventh Amendments to the United States Constitution, and do not comport with the Administrative Procedure Act ("APA").20 The Court holds, first, that this dispute is not justiciable and, second, that this Court's jurisdiction over the case is precluded by the comprehensive statutory scheme for administrative decision-making and judicial review specified by the Natural Gas Act of 1938 ("NGA"), 15 U.S.C. § 717 et seq. The Court, finally, in the alternative and in the exercise of its discretion, concludes that it will decline to entertain the declaratory claims asserted.

A. The NGA and Plaintiffs' Claims

An overview of relevant provisions of the NGA provides useful context. This section also briefly outlines the declaratory relief Plaintiffs seek.

1. Overview of the NGA

This case requires interpretation of several provisions of the NGA as amended by §§ 311-318 of the Energy Policy Act of 2005 ("EPAct"), Pub. L. No.109-58, 119 Stat. 594, 685-93. The NGA is administered by Defendant FERC.21 The ultimate authority within FERC is a commission comprising five commissioners (the "Commission") appointed by the President of the United States.22

Plaintiffs are alleged to have violated NGA § 4A, 15 U.S.C. § 717c-1, a provision prohibiting manipulation of natural gas markets, and the FERC rule promulgated pursuant to this section, 18 C.F.R. § 1c.1. Section 4A was enacted in 2005 as § 315 of the EPAct, 119 Stat. at 691. Section 4A provides:

It shall be unlawful for any entity, directly or indirectly, to use or employ, in connection with the purchase or sale of natural gas or the purchase or sale of transportation services subject to the jurisdiction of the Commission, any manipulative or deceptive device or contrivance (as those terms are used in [15 U.S.C. § 78j(b)]) in contravention of such rules and regulations as the Commission may prescribe as necessary in the public interest or for the protection of natural gas ratepayers. Nothing in this section shall be construed to create a private right of action.

A focus of Plaintiffs' claims is § 22 of the NGA, 15 U.S.C. § 717t-1, which also was enacted in 2005. See EPAct, § 314(b)(1)(B), 119 Stat. at 691. Section 22 provides for civil penalties for violations of the NGA itself or any Commission "rule, regulation, restriction, condition, or order" issued thereunder:

(a) In general
Any person that violates [the NGA], or any rule, regulation, restriction, condition, or order made or imposed by the Commission under authority of [the NGA], shall be subject to a civil penalty of notmore than $1,000,000 per day per violation for as long as the violation continues.
(b) Notice
The penalty shall be assessed by the Commission after notice and opportunity for public hearing.
(c) Amount
In determining the amount of a proposed penalty, the Commission shall take into consideration the nature and seriousness of the violation and the efforts to remedy the violation.

The Commission has established an administrative process for proceedings that may result in imposition of civil penalties.23 The process potentially comprises several stages: a pre-investigation stage; an investigatory phase; adversarial enforcement proceedings, which may include a hearing; and a final determination of whether civil penalties should be assessed. FERC may settle with a respondent or terminate a proceeding at any time. These stages are handled by different offices and personnel at FERC.

More specifically, FERC's Office of Enforcement staff ("Enforcement staff"), in the pre-investigation stage, may commence the administrative process based...

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